Markets whipsawed by expected and actual data

With analysts and economists invariably incorrect in their reported expectations of important data, I must reiterate: "Better to keep ones mouth shut and be considered ignorant, than to open it and remove all doubt." The "incorrect expectations" prompt a market action, which, upon issuance of the actual report, prompts a "reaction." The resulting market moves can prove dramatic and with their "record" of performance one wonders why issue any expectation at all? This weeks "erroneous" expectation as well as those of recent weeks illustrates my assessment of their performance. Prior to the report on job creation, the expectation was for 190,000 to 200,000. When the actual number was issued at 8:30 ET of only 88,000 jobs created, the U.S. equity markets sold off sharply and the government bond yields declined dramatically pushing bond price sharply higher. All unnecessary in my opinion had no expectation been issued and the market was allowed to disseminate the actual figures. The analysts are paid handsomely……for consistently "bad" information. Even ADP, the U.S. payrolls company, on Wednesday estimated jobs created of 158,000 and was also out of line. The U.S. labor participation rate is the lowest since 1979 and formed the basis for the reduction in the U.S. labor rate of 7.6% from 7.7%. The Friday jobs "created" figure of 88,000 was a disappointment to market watchers and was not conducive to an economic recovery or labor improvement. Half a million unemployed workers stopped looking for jobs in March allowing for the cut in the jobless rate. Consumer confidence index fell to 59.7% in March against 68.0% in February. Another potential "nail in the coffin" of the current "euphoria" in the equity marketplace.

Cause and effect….

Cause:

Consumers are spending "someone else’s money" at an alarming rate. Consumer debt in February increased by a seasonally adjusted $18.1 billion, the biggest since last August according to the U.S. Federal Reserve. That compares with January’s $12.7 billion gain. Monthly debt increased at the rate of 7.8% in February after the 5.5% in January. The gain was unexpected by economists. The gain in consumer credit for February was prompted by non-revolving debt such as auto loans, personal loans and student loans. That gain was up by $17.6 billion or 10.9%, the biggest since July of 2011.

Effect:

The "usual suspect" of using one new credit card to pay the minimum on an old credit card is a program that spells "financial suicide" but prompted by both the unemployed and the "under-employed," those that took jobs paying substantially less than the job they lost. The time to "pay the piper" is fast approaching.

Meanwhile the "sabre rattling" from North Korea continues as they prepare to "test" another rocket with questionable capabilities. The U.S. has 28,000 troops in harm’s way in South Korea within range of the North Korean missiles. We can only hope that the "fools" in the North recognized the futility of attacking the South and the U.S. I can only hope that should they make that "mistake" that the U.S. military delivers a "crushing blow" should retaliation be necessary.

About the Author

John has over 40 years experience at major U.S. Brokerage firms as Manager and Director of various International Divisions and is the founder of his own trading and brokerage firms. Over the years John has gained a wealth of knowledge and experience in all aspects of investments and trading. He was also a floor trader at the Commodity Exchange in New York. He formed Acuvest in 1999 and can be reached at futures@acuvest.com.